Europe’s Antitrust Chief Confirms Google Shopping Objections, Launches Formal Android Probe

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As widely expected, Europe’s antitrust chief, Competition Commissioner Margrethe Vestager, has issued a formal Statement of Objections (SO) regarding the operation of Google’s shopping search comparison service — marking the latest step in a five-year long antitrust investigation and an escalation of European anti-competition action against Mountain View.

Google now has 10 weeks to make a formal response to the Commission’s Statement of Objections. A settlement secured from Google by the prior Competition Commissioner, last year, left complainants unhappy.

Google has a hugely dominant share of the search market in Europe, of circa 90%. Complaints about its search business have focused on specialised search services around particular verticals such as shopping, travel and hotels — where the accusation is that Google displays its own results in a more prominent manner than competitors. Other complaints have related to online advertising and pressures Google may have been placing on advertisers to use Google ads.

Investigations into those other areas are still active and ongoing, according to Vestager — with today’s SO relating specifically to Google Shopping. And to what she described as the “preferential treatment” Google gives its own shopping comparison service in Google search results, which she suggested has been ongoing “in a broad range of member states” since 2008.

Vestager, who is relatively new to the role — taking over from prior Competition Commissioner Joaquín Almunia last November — also announced a parallel formal in depth investigation into Google’s mobile OS Android, which has been the subject of additional competition complaints from rivals (including Microsoft, Nokia and Oracle), lobbying as a coalition called FairSearch.org.

Their complaint has been that Android is a “Trojan horse” designed to enable Google to “dominate the mobile marketplace and cement its control over consumer Internet data for online advertising as usage shifts to mobile”. The Commission is now taking a formal look.

Google Shopping back in the spotlight

Speaking during a press conference held today in Brussels, Vestager said: “Today we have adopted a Statement of Objection to Google. It outlines our preliminary view that Google’s favorable treatment of its comparison shopping service… is an abuse of Google’s dominant position in general search.

“Google now has 10 weeks to response, and of course I will carefully consider the response before deciding how to proceed.”

“Our preliminary view in the SO is that in its general Internet search results Google artificially favors its own comparison shopping service and that this constitutes an abuse,” she added. “Our investigation so far shows that when a consumer enters a shopping related query in Google search engine Google’s shopping comparison is prominently displayed at the top of search results.”

She made it clear that she is not looking for a particular tweak to Google’s algorithm, or to enforce a particular screen design — the latter being the type of settlement Almunia had sought — but rather said she is seeking “to work with principles that can be futureproofed”.

“To be clear, we do not wish to interfere with screen design, with design choices with how things are represented on the screen as such, or how the algorithm works. Rather what we would like to see is that consumers are certain to see the best comparison shopping results,” she said.

As it stands, Vestager asserted that consumers using Google search for shopping comparison are always being pushed towards Google’s own comparison service, regardless of whether it is the best or more relevant result for their query. That’s the behavior she wants to see modified.

“Dominance as such is not a problem, not in general, and not under EU law. However dominant companies have a responsibility not to abuse their powerful market position by restricting competition either in the market where they are dominant or in neighboring markets,” she noted.

“I think it is important to rethink how this can be solved,” Vestager added, responding to a specific question about the type of solution she’s seeking. “This is why I state that I’m looking for something based on principle, and therefore hopefully being futureproofed, because we can’t meet like this every six months. That would not make sense.

“The design of the screen that meets you is also an innovative process — and for me I think it would be better to find something based on principle, being future proof, than being based on a certain look on the screen. Because that could hamper innovation as well. But I am very, very open to solution as long as they address the concerns that we have. That there is a conduct that hampers consumers’ choice and also innovation in general.”

Asked how many years the Google Shopping investigation might take, Vestager would not put a timeframe on it — saying only that it is the start of a process that could take some time.

“This is a Union built on law and therefore I think sometimes one had to also accept that it takes some time for the court to decide eventually, both for us and also the for the companies in question,” she added.

Asked about the Commission’s willingness to pursue a fine against Google, Vestager emphasized that “every road is open” at this stage — meaning both further formal discussion proceedings towards finding a solution, but also the ultimate threat of a fine if Google can’t satisfy the Commission.

“I would like to hear what Google has to say for itself,” she added. “This is the point where things are open, and therefore we should not close any doors.”

Android under scrutiny

On the Android probe, Vestager said the Commission has received a number of complaints relating to Google’s mobile OS, and would be focusing its investigation on three areas of concern:

  1. that Google is allegedly “requiring and incentivizing” smartphone and tablet manufacturers to exclusively install its own services, and in particular its search engine
  2. that it is allegedly bundling certain Google products with other apps & services
  3. whether Google is hindering the ability of smartphone and tablet makers to use and develop other OS versions of Android (aka Android forks)

An internal Google memo responding to the EU’s antitrust complaints leaked yesterday.

In the memo Google’s General Counsel Kent Walker asserted the company has a “very strong case”, telling staff:

An [Statement of Objections] is not a final finding. It’s a document in which the Commission staff sets out its preliminary arguments so that the company in question can respond. Expect some of the criticism to be tough. But remember, it’s also an opportunity for Google to tell our side of the story. We have a very strong case, with especially good arguments when it comes to better services for users and increased competition.

It should be noted that Google is a sophisticated media operator, with muscular lobbying machinery, so it’s highly likely it leaked the memo intentionally, as it gears up for a fresh war of words with Europe’s regulators.

Google has now publicly rebutted the competition complaints against its search processes here, and Android here.

Google’s early defense appears to be focused on arguing there is increased consumer choice when it comes to search services, with the company noting: “While Google may be the most used search engine, people can now find and access information in numerous different ways — and allegations of harm, for consumers and competitors, have proved to be wide of the mark.”

In response to the Android probe, Google notes that its Android partner agreements are voluntary. “The Android model has let manufacturers compete on their unique innovations.  Developers can reach huge audiences and build strong businesses.  And consumers now have unprecedented choice at ever-lower prices.  We look forward to discussing these issues in more detail with the European Commission over the months ahead,” Google adds.

Vestager said she has prioritized the long-running Google antitrust investigation since taking up office, ensuring the case has been updated to reflect what she noted is a fast-paced market, and meeting with formal and informal complainants, as well as with Google itself.

She would not disclose what ground her private discussions with Google has covered thus far, noting that the SO takes the investigation into a new phase — where Google will be able to formal respond and defend itself.

“That’s exactly why this point in the investigation is important. Now we have the Statement of Objection, now we go into a different phase, where Google can defend itself — as they should. Both answer our SO within 10 weeks and ask for an oral hearing, which of course will enable a completely different way of talking about it,” she added.

She also made a point of noting that one in four of the individual companies involved in the Google Shopping complaint are U.S. companies — doubtless hoping to steer off accusations of anti-U.S. sentiment.

Earlier this week the EU’s digital commissioner, Günther Oettinger, made a speech that was interpreted as a swipe against U.S. tech giants whose platforms have come to dominate the consumer web. The WSJ reported Oettinger’s comments as a call to regulate Internet platforms in a way that allows a new generation of European operators to overtake the dominant U.S. players — albeit he was specifically calling for future Internet platforms to be “more open and interoperable”, and based on standards with “a significant contribution from European industry”.

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